The provision of consulting services to public administration and the public sector must respond to the particular challenges and problems of the sector. In turn these challenges and problems derive from the national, social and economic context and, in large measure, the present and future policies of the government. Governments turn to consultants because the challenges they face are new and complex and the right responses are difficult to find in the absence of precedents, experience, and resources for adequate analytical and conceptual work. In addition, governments are constantly exposed to political pressures and criticism, which may or may not be justified. Comparisons with the private sector are frequently made, hence the growing interest in evaluating and using private sector experience to enhance effectiveness and efficiency in the public sector.

The evolving role of government

The role of government in modern society is pervasive. Not only do governments provide or regulate a vast array of services, they also provide the legislative framework for governance. Government can achieve its objectives in many ways: by producing and delivering a service itself; by making direct payments to individuals and businesses; by setting up a government-owned commercial enterprise; by providing direct grants or low-interest financing loan guarantees; by offering tax incentives to individuals and businesses; or by regulating business and other activities of individuals and organizations.

The total outlay of government is between 30 and 50 per cent of gross domestic product (GDP) in most Western industrialized countries, while in some developing countries the public sector represents an even higher proportion of GDP. Governments also provide a relatively high percentage of total national employment. An exhaustive list of challenges facing the public administration sector in various countries would be very long indeed. Governments have sought assistance from consultants on a wide range of economic, social and administrative issues.

Government needs to be reinvented; there can be no prosperous and democratic society or flourishing market economy without a strong and effective government. Criticizing governments in general terms is of little use: what is needed are workable proposals. We are going to learn ten broad principles, or directions, that underscore how public organizations can “reinvent” and structure themselves, moving from centralization to decentralization, from monopolies to competition, from bureaucratic to market mechanisms and from funding inputs to funding outcomes or results.

reinventing government

The ten principles:

1. Catalytic government: steering rather than rowing.
2. Community-owned government: empowering rather than serving.
3. Competitive government: injecting competition into service delivery.
4. Mission-driven government: transforming rule-driven organizations.
5. Results-oriented government: funding outcomes, not inputs.
6. Customer-driven government: meeting the needs of the customer, not the bureaucracy.
7. Enterprising government: earning rather than spending.
8. Anticipatory government: prevention rather than cure.
9. Decentralized government: from hierarchy to participation and teamwork.
10. Market-oriented government: leveraging change through the market.

When management consulting was first introduced to public sector management, assignments tended to be general in nature. In recent years a number of factors have changed this pattern. Government programmes are becoming more complex. There is a need to improve the productivity and social impact of government services in the face of shrinking budgets and the steadily increasing demand for more diversified and higher-quality public services. Advances in information technology are both facilitating and requiring the redesign and re-engineering of major government programmes and services. As a result, the nature of consulting services required by this market is becoming more specialized and more complex. Most of these services tend to be in one or more of the following four areas.

• Strategy and policy advice, generally related to wide societal or administrative problems facing the public sector. Management consulting services are generally bought by the top echelon of public sector managers and politicians, who aim to clarify options and determine the optimum direction in a highly complex environment. This market is small, and is generally limited to consultants with publicly recognized experience in the policy area.
• Designing, developing and managing programmes and operations is an area in which there are far more frequent requests for management consulting assistance. These requests may be made by public managers, in reaction to an evaluation or audit, or may be triggered by consultant marketing.
• Adjustment of the machinery of public sector organizations. These adjustments usually focus on organizational structures, processes and supporting systems such as finance, procurement and human resource management. Concerns to increase productivity and use new information technology to the full have greatly intensified the pressures for public sector managers to restructure the processes and systems for which they are responsible.
• Facilitating change processes in public sector organizations. Whether the change is to the structure of the organization and its way of doing things, or to supporting systems, the management of the change process itself is critical to the success of the organization. Consulting support in establishing continuous learning, total quality and performance management processes can provide the framework for the change process. With the reduction of in-house services, public sector organizations are increasingly retaining consultants to provide training and counselling services to their staff. Training is frequently needed in management and communication skills for new organizational processes, as well as in standard management and technical areas.

Understanding the public sector environment

The worst error a consultant can make in entering the public sector is to believe that management is the same everywhere and that solid private sector experience provides all the answers. True enough, drawing on private sector management know-how is currently one of the principal ways of improving public management. However, there are significant differences in complexity, driving and impeding forces, time horizons, resource constraints, hierarchical relations, organizational cultures and traditions, individual motivations and other factors that make public sector processes and organizations different from private ones.

Most, if not all, public sector problems are embedded in larger social, economic, political or administrative issues. It is very important to understand thoroughly the nature and dimensions of the problem. The problem presented is often deceptively simple, and it is sometimes necessary to build problem definition (with the various stakeholders) into the consulting process. Inadequate problem definition, conflicting views of what the real problem is and how it should be handled, and an insensitive approach to social, political and environmental issues can lead to an unmanageable assignment, especially in its later stages.

Public sector decision-making

Public sector decision-making is the process by which a government or government agency responds to a societal or an administrative issue.

Societal issues are those social or economic problems or opportunities that require collective action by society, generally through a government programme or agency. Government programmes  be they services produced or arranged by the government, regulatory programmes or economic grants to individuals or businesses – require careful analysis, planning and organization.

Administrative issues are problems or opportunities related to the machinery of government. A government is a large administrative system, organized to provide different types of service or to deliver regulatory programmes. As with any large administrative system, it must develop organizational structure, policies and procedures. It must also operate a multitude of administrative services. These administrative services may or may not affect the public at large, but their quality and productivity strongly influence the efficiency and image of the whole public sector.

The process is initiated when issues arise in society or in the machinery of government. Public sector decision-making usually comprises four major steps, in each of which there may be a demand for management consulting assistance. To understand the nature of the issue, data collection is required (step 1). Many public issues are by their nature complex, and data collection may be extensive. Data may be collected from secondary sources or as primary data by surveys or other means. It is particularly important to understand the scope of the issue being examined and the decision elements that the data will have to illuminate, in order

to decide on the extent, depth and nature of the data gathering.

The collected data are analysed (step 2) to develop different strategies for a programme. Once again this analysis may be relatively simple or very complex depending on the nature of the issue.

Consultation with major stakeholders (step 3) is not unique to public decision-making, but it is of particular importance in the government sector. Invariably societal issues and some administrative issues affect a great many people in different ways. Clearly identifying and consulting stakeholders, both within government and in society, can be essential to the weighing of strategy alternatives and the eventual success of a programme.

When the three preceding steps have been completed, an alternative is selected (step 4) from which to develop a programme. This selection will be heavily influenced by the opinions of all stakeholders, including the government of the day, the public at large, special interest groups, and the body of public servants. While good data collection, analysis and consultation can greatly facilitate decision-making, decisions themselves are strongly value- based and, unlike most private sector decisions, must respond to many conflicting interests and criteria.

Once a decision has been made, it must be translated into a carefully designed programme, which should be evaluated during and after implementation. The evaluation may lead to adjustments to the programme. A specific initiative may not involve all the steps of the process as described, but generally a significant initiative must go through the entire process. The process becomes more political in the later stages of decision-making.

National and local politics

Important decision-making processes in the public sector are political processes even if the issues concerned are technical. Minor administrative decisions, seemingly without any political implication or significance, may involve political criteria and can become politicized under certain circumstances. Senior administrators may well emphasize their independence and non-political approach to decisions; but politics are omnipresent and the power of political parties and their coalitions shapes public sector decision-making through senior personnel appointments, reorganizations, budget increases and cuts, changes in legislation, decisions taken by the council of ministers, and more or less direct personal interventions and lobbying. Invariably, politicians think of the political impact of legislation, budgetary choices, resource allocations, decentralization, programme proposals, investments, changes in public services and their costs, etc. The nature of a particular national or local political scene is extremely important to consulting. In an atmosphere of political polarization, hostility and confrontation, even the most rational and needed practical proposals may be difficult to pursue and may be considerably delayed or even discarded.

Opposition parties may attack and destroy them for purely political reasons. In less confrontational political environments, national interests may prevail over ideology and political party interests, though not without negotiation and compromise. The status, quality and independence of the civil service will also influence the quality of relationships of public administrations with consultants.

Social objectives

A key requirement of political decision-making is the balancing of social and economic objectives in developing and implementing public policies and programmes. Social objectives may include the development of specific regions, the promotion of small businesses, job creation, education and services for minority and underprivileged groups, equitable distribution of contracts and purchases, the development and improvement of public services, provision of vital but costly services to remote regions, environmental protection, and so on. A problem often faced by consultants is that social and economic objectives and criteria are vague, inaccurate or even conflicting. It is usually necessary to seek an operational (explicit and measurable) definition and categorization of social objectives, draw attention to their cost side and consider alternative ways of financing them.

Attitudes to change and to consulting

Seasoned administrators, who may have seen many unnecessary reorganizations, unfulfilled political promises and failed projects, tend to be cynical about new change proposals and consulting projects. The pressure of competition and the opportunities created by globalization, market liberalization, new technologies and other developments tend to have a smaller impact on public administrations than on private businesses. Consultants may be viewed with suspicion and distrust, as outsiders who have the easy job of writing another report and then leaving the organization, while the public manager will once more be left with a proposal that cannot be implemented, without any real support from superiors, and with insufficient resources. Consultants may be seen as privileged individuals whose remuneration is out of proportion to their experience, contribution and responsibility.

The consultant’s attitudes and behaviour

Experienced consultants are aware of these apprehensions. They realize that the key issue is to develop a relationship of trust and an understanding of the client as a person. Many public managers are competent and dedicated people working in systems that do not encourage high performance, make changes difficult, and require special skills and approaches to get anything improved. The consultant must not only understand why certain things are possible and others not, but must empathize with the client and develop a true partnership in working on

solutions that the client can accept as his or her own and defend with superiors, elected public bodies and even with the public at large. It is important to believe that quality public services are essential to the life and development of the community, including healthy development of the private sector. A negative and unduly critical attitude to public sector managers and other civil servants is counterproductive and inhibits effective problem-solving.

“Shoulds” and “should nots” in consulting to government

“Shoulds” that work

1. Show knowledge of the agency’s methods, procedures and processes.
2. Demonstrate genuine interest in the public sector work environment and the difficulties faced by public servants.
3. Learn the specialized jargon.
4. Understand how the agency is measured.
5. Treat each government employee as an individual, separate from governmental stereotypes.
6. Match your own staff qualifications closely to the agency’s requirements.
7. Recognize that decisions often take longer than in business.
8. Respect the fiscal year constraint.
9. Identify and meet the client’s perception of a good job.

“Should nots” that don’t work

1. Refrain from a hard-sell approach.
2. Avoid designing projects that require a great deal of interdepartmental cooperation.
3. Don’t just finish a project but “ease into the completion”, suggesting review steps and follow-up activities.
4. Don’t forget to keep the client fully informed and closely involved, even if the client tries to avoid responsibility.
5. Don’t underestimate the role of the written agreement, especially with deliverables.

Working with public sector clients throughout the consulting cycle

Marketing

Most marketing to the public sector (development of leads and identification of consulting projects) is through networking and personal contacts. A good network can only be developed over the course of time and requires constant effort to maintain. In a limited number of cases, it can lead to direct selection, but more often will facilitate pre-selection and shortlisting.

Most large assignments in the public sector are awarded on the basis of competitive bids; the success ratio of firms bidding competitively varies but is not very high, and preparing proposals is both expensive and time-consuming. Consultants are therefore well advised to develop an efficient process for competitive bidding and to try to maximize their chances of repeat business, which is much less expensive to obtain than is new business. It is useful to develop some business as sole-source, directly awarded contracts: these are generally small, but are relatively inexpensive to obtain and permit consultants to build up and maintain good client contacts.

Selection through public procurement

The selection of consultants, as indeed of other goods and services, has to comply with legislation and rules applied to public procurement in general. What, then, is typical of the public sector? Invariably, formal, precisely defined and structured procedures are used. Most probably there will be an official document, issued by a government agency, which describes the procedure and criteria for selecting a consultant and provides information and guidelines, contract clauses, forms and the like.

The reasons for the use of mandatory formal procedures in the public sector can be summarized as follows:

• to give all eligible candidates the same chance;
  • to increase the probability of identifying and choosing the most suitable consultant;to make selection “transparent” and less open to criticism;to reduce the risks of favouritism, nepotism and corruption;
  • to harmonize the approaches used and transfer good experience among various government departments and public agencies;
  • to improve the overall quality of consultant selection and appointment in a complex public sector environment.

As a rule, the procedure separates project identification and the drafting of terms of reference from project implementation. A consultant who helps the client to develop a new project idea, analyse the situation and the client’s needs, and produce the terms of reference is regarded as an “insider” and is not usually authorized to participate in the bidding for project execution. The consulting process is thus split into two separate phases, for which different consultants are engaged. This can create technical difficulties and discriminates against the consultants who do the creative and conceptual work of designing the project and producing terms of reference. Conversely, consultants who implement a project may not feel responsible for conceptual flaws because they follow the instructions – which may be very detailed – in the terms of reference. They can always refer to the terms that were given to them if the client is not happy with the focus of the assignment and the results produced.

Data banks. Many public sector organizations maintain a data bank of consultants. These data banks may have thousands of consultants and consult- ing firms, classified by skill areas. In some cases, registration with the relevant data bank is a prerequisite to receiving invitations to make a proposal or being eligible to supply services.

Competitive bids. Depending on the size of the proposed consulting assign- ment, competitive bids may be requested from consulting firms or individual consultants. Bid documents must generally conform to detailed specifications; failure to respect these specifications leads to the disqualification of the bidder. The evaluation procedures of these bids also depend on the size of the proposed assign- ment: the criteria, and often the results, are usually available to the bidder.

Budgetary constraints. There may be a strict budgetary constraint limiting the size of the assignment, or predetermining its time schedule.

Managerial discretion. Despite the predominance of formal procedures, public sector procurement of consulting is not totally inflexible. As a rule, small assignments may be arranged by direct selection or using simplified procedures. In certain cases, the appointment of consultants who have done a satisfactory job may be authorized for further services related to the previous job.

Contracting

Both consultants and public sector client agencies may have their standard contract formats. In such a situation, the consulting firm will normally be more flexible and agree to accept its client’s mandatory contract format. Several aspects of contracts with public sector clients ought to be stressed:

• Definition of results should be clear and detailed (what results, including their quantity and quality, who will identify and endorse results, who will assess quality, who will have the final word).
• There needs to be a clear understanding of what is meant by implementation and how far the consultant should go, e.g. in implementation of a new system, what is understood by “system”? Does the consultant have to deliver a pre- liminary proposal, complete documentation, a system that works, a system plus trained staff to operate it, a system that has attained agreed parameters? etc.
• The participation of the client’s management and staff should be specified precisely, especially for projects that cannot be completed without this participation.
• Confidentiality is a key issue.
• The consultant’s right and obligation to contact directly and consult the public administration’s own clients, users and stakeholders should be specified.
• The fee structure should be clear (what is reimbursable and at what rates, e.g. subsistence allowances, first-class air tickets or hospitality expenses).
  • The budget and payments structure and schedule should be clear (to comply with budgetary and payment periods and procedures of clients).
  • The fee levels should be specified. Requests for proposals generally ask for detailed information on pricing, including the daily rates and time allocation of individual consultants. Often maximum or set fee rates are established by regulations, and these may be below market rates in the private sector.

Implementation

Many experienced consultants consider that in the public sector, people and process problems prevail over technical problems. It is important to adopt an approach that includes full consultation and communication with all stake- holders. Consultants can be excessively idealistic or tempted to recommend the best theoretical solutions. While there is academic satisfaction in finding a “best” solution, what matters most is finding solutions that are practical, acceptable and stand a good chance of being implemented. A recommendation that leads to real change is worth any number of elegant reports that will gather dust on the shelf. Full consultation will ensure that conclusions and recommendations do not surprise and antagonize stakeholders, although it is in the nature of societal problems that not all stakeholders will be equally satisfied with a recommendation.

As with all consulting, public sector assignments must be managed for quality, scheduling and budget. Perhaps the greatest risk with public sector work lies in inadequately forecasting the amount of time necessary for working with stake- holders and for the decision process in general. There are no short cuts in the process of consultation with stakeholders, and neglecting this process can have painful consequences. Another characteristic of most public sector assignments is the need to produce well-edited reports: these documents are, or might be, made public and care and time should therefore be given to their production.

Currently, Tanzania's per capita income in terms of GDP has decreased by 5.2 percent compared by 5.5 percent in 2021.

WHAT DOES IT MEAN TO ECONOMY AND HOW DOES IT AFFECT THE ECONOMY REGARDING INCREASE OF THE INFLATION RATES BY 4.94 PERCENT WHICH CAUSE RISING THE COST OF LIVING IN GENERAL.

“How it going to affects small business by means of MSMEs and large businesses, development projects and investments?

Finance for Small Business

Some businesses require little more than pocket change to get started; others need hundreds of thousands of dollars or more. Whatever amount is needed, bear in mind that raising money is meant to be a difficult process. The obstacles and problems inherent in obtaining money, particularly from a lending institution, are designed to filter out those who are unfit to survive. Put another way, if an entrepreneur fails to raise enough cash to get his or her ideas off the ground then he or she has shown a lack of what it takes to run a business. There is nothing new in this. ‘Starting a business is easy,’ they says, Welcome to the world of commercial enterprise where after 50 doors have been slammed in your face the next one must still be approached with courtesy, optimism, and a smile.

Sources of Finance

The trick to finding capital, say some entrepreneurs, is getting it from the right sources and in the right sequence as a business grows and evolves. This means that when searching for funding every available avenue should be explored. Learn from every approach. For example, if a loan officer at a local bank turns down your request, politely ask why and use what is said to improve the next pitch.

Often enough it’s not what a money lender is told, but what the money lender wants to hear that is most important. Furthermore, when looking for lenders, try to find ones that specialize in the specific industry or field in which the proposed business is located. Investors are usually more receptive to industries and businesses they understand.

Following, in alphabetical order, are the most common examples of where money can be obtained. Ask around and investigate to determine how each option in your region can be maximized:

Banks

Winning over a bank is one of the highest hurdles a start-up business faces. Banks are necessary to small business operators for two reasons, (1) they’re a safe place to store money, and, (2) they can be a source of finance and other services. Unfortunately, most banks enjoy loaning money to people and businesses that don’t need it. This is because every bank wants to ensure that it gets its money back.

Note also that:

• Banks are by nature cautious. Requests for money must therefore be backed up with firm facts and figures.
• Banks seek security in the form of proven cash revenues or collateral. If you don’t have one or the other, you probably won’t get a loan.
• If a bank is uncooperative or uninterested in your needs, move on to another one.
• Banks do not exist to help keep businesses afloat.
• People run banks. If you get to know these people your chances of success may increase.
• Banks hate surprises. Therefore, if you manage to secure a loan and can’t make a payment on time, you should tell your bank in advance.
• Banks make mistakes. A study in the UK discovered that up to 20% of the statements banks send out are inaccurate. It’s therefore prudent to regularly check bank statements.
• Always approach a bank or banker having done a bit of homework. It shows that you’re on top of things, which demonstrates integrity and professionalism.
• Most banks are often open to negotiation when it comes to interest rates. Don’t be afraid to haggle.

Corporate Venturing

Some companies loan money to entrepreneurs in the hopes of establishing a working relationship with them. This is called corporate venturing. Needless to say, the skill or product of the entrepreneur must be of benefit to the company being asked and be backed by a solid business plan. The company to which the idea is being pitched may also seek some type of equity share (ownership) agreement.

Crowd funding

The practice of obtaining funds by publically asking for small donations has been practiced for centuries. The cost of the Statue of Liberty, for example, was crowd-funded by a newspaper campaign.

Paying for upcoming military campaigns by selling war bonds and writers collecting cash from future buyers to fund an as-yet-to-be-printed book provide two additional examples. Nowadays, more than two-dozen crowd-funding sites exist online. Crowd-funding schemes usually involve either pre-selling a product (which is similar to a ‘production contract’ arrangement) or the selling of some sort of equity in the business that is producing the product. Either way, it can be extremely difficult to generate the attention of individuals and groups without an established network and/or skillful media involvement. An extraordinary public-relations or marketing campaign (and/or incredibly good timing) seem to be essential to crowd funding success. Don’t be seduced by stories that make crowd funding look easy. Without first establishing a vibrant business network, crowd funding can be as fickle and distant as winning the lottery.

Equipment Loans

Expensive equipment (i.e.: machinery, display cases, tools, etc…) can sometimes be purchased with an extended, low-interest loan from the company that produces or sells the equipment. In return, the entrepreneur may be asked to sell or advertise the company’s products in his or her business (usually via professional signs and displays). Talk with suppliers and manufacturers for more information.

Family and Friends

Entrepreneurs that can prove (or have shown) that they’re trustworthy and reliable - and have put together a viable business plan - may be able to find family members or friends who are willing to cough up the cash needed to start a business. Note, however, that these folks should not be rewarded with administrative titles in return for their help (which may create future problems). It’s also usually not a good idea to ask friends and family to invest their life savings in a business (they may not get it back). Since asking friends and family for money is the most personal of routes to take this avenue must be planned with care and forethought.

Government Help

Local, state, and BOT sometimes offer financial resources for small businesses if and when certain requirements are met. Examples include businesses that employ handicapped people (or minorities), businesses located in areas in need of economic assistance, businesses designed to help the environment, or businesses designed to reduce local problems. Contact a local economic development office for details.

Grants

Grants provide money that does not have to be paid back. Universities, professional organizations, governments, and trade associations are typical grant sources. The unemployed, pensioners, young entrepreneurs, artists, and other out-ofthe-mainstream groups are usually the most eligible to receive a grant if they qualify – as are competent people who trying to set up a business in an underdeveloped area. For the most part grants do not involve large sums of money – only a few hundred or a few thousand dollars at most – but for a fledgling business a small amount of cash can go a long way toward reducing expenses. Apart from seed funding, grants can also be obtained for employee training, marketing costs, and insurance. Don’t be ashamed to ask for help in the form of a grant. Just be prepared to fill out lots of forms before and after any money is received.

Issuing Shares

The issuing of shares is a finance option that is only available to businesses that are incorporated.

The advantage of issuing shares is that the people that buy them don’t have to be paid back. The disadvantage is that the people who buy shares are part owners of the business and as such they can hold the entrepreneur accountable for whatever he or she does (or doesn’t do). Shares can be used in a variety of ways.

Small Business Administration Loans

Loans available from the Small Business Administration (SBA) include:

• Direct SBA loans (which have a low interest rate). The name comes from the fact that this type of loan is issued directly from the government. Unfortunately, because Direct SBA loans are intended for minorities and veterans they may be difficult to acquire if the person requesting them does not qualify.

• Guaranteed loans are sometimes available to individuals who have been turned down by a bank. The scheme works by having the government guarantee a loan (via a participating bank) on behalf of the entrepreneur. More leeway is therefore usually given in paying the loan back.

Soft Loans

Loans are declared ‘soft’ when they do not require security or collateral, their payback schedule is long, and their due dates are extendable. That being said, every penny that is borrowed must be paid back, with interest, just like a regular loan. Small Business Development Centers, local governments, business-oriented banks, corporations, business trusts, and other business-friendly associations are the best places to look for soft loans.

Trade Credit

Some suppliers do not require payment for the merchandise they sell for up to 30 days or longer – so that the purchaser has time to sell the merchandise before paying for it. If a small business has a solid customer base and it has little doubt that it can shift merchandise easily, this can be a creative way to lower inventory costs and begin trading with less money than was originally envisioned.

Venture Capitalists

A venture capitalist is a person or group that finances businesses. In return, he or she (as part owner) expects to share in the success of the business in which his or her investment has been made while expecting yearly growth rates of up to 40% or higher. Because most venture capitalists are successful business people in their own right, they’re often adept at determining if a commercial idea is a good one. Note that many venture capitalists are not really interested in providing capital for small businesses. Instead, they look for high-flying enterprise ideas that have big profit expectations and will pay back their investment very quickly. Additionally, since most venture capitalists are only in it for the money (who isn’t?) they may sell their shares to unknown buyers in a few years’ time.

Mixing Up the Options

If the sources mentioned above aren’t enough on their own, consider mixing them up. Maybe a local bank won’t lend TSH 100,000 to start a business, but it may consider TSH 25,000. Additional funds can then be obtained from family and friends, the selling off of personal assets, and so on. Still more cash can come from grants or through trade credits or equipment loans. Don’t be afraid to be creative.

Advice from the Pros

• When in need of finance, shop around, be persistent, and never be afraid to ask for advice.
• Open up every available line of credit before going into business – even if it means taking on more credit cards. Few institutions will loan money to a cash-hungry business after it has been set up.
• Ensure that all equipment and machinery is bought at the best price and under the best conditions. Used equipment may be seem like a less expensive alternative to new equipment, but make certain what you buy has lots of life left in it. Entrepreneurs that buy cheap often buy twice. Remanufactured equipment, which comes with a guaranty, is a much safer bet.
• Get to know your banker before you need money from him or her (i.e.: while you’re still solvent).
• Being desperately in need of cash is a bad time to introduce you to a money lender.
• Do your homework before seeking cash. You may need more than you thought. Many entrepreneurs claim that every time they turn around there seems to be another payment that has to be made (for licenses, fees, duties, permits, etc…). Prepare for this fact.
• Don’t let your business die a death from a thousand cuts. Little expenses add up and they can break a business. Again, factor everything in.
• After you’ve deduced how much finance your business needs to get up and running, double the figure. (Some entrepreneurs suggest tripling it!)
• The world is littered with failed businesses whose owners were too proud or stubborn to ask for money when it was needed. Borrowing money is not a sign of weakness, but rather a normal, everyday business occurrence. Know that taking on debt is often a necessity if you’re thinking of expanding.
• Consider selling equity (shares) in your business as a means of reducing debt. Although this means that the people with equity shares will own a part of your business, you don’t have to pay them back (which can significantly reduce expenses).
• Lending institutions are more receptive to entrepreneurs that hold production contracts (i.e.: orders for a product). Getting potential customers to order a product before your business gets started may be difficult to do, but it can be done. Use such orders to impress a lender.

According to legend, an enthusiastic patron of the arts once approached Pablo Picasso in a restaurant. ‘Please draw me something,’ she insisted, ‘I’ll pay you whatever you want.’

Eager to continue his meal in peace, the artist drew a few lines on a napkin and handed it over.

‘That will be ten thousand dollars,’ he said. ‘Ten thousand dollars!’ the woman shrieked. ‘But it only took you twenty seconds to produce this!’ ‘No,’ Picasso replied, ‘forty years and twenty seconds.’

In his own way, what Picasso was trying to explain to his admirer is that there is a difference between price and value. A price is the amount of money charged for a product or services that consumers exchange for the benefit of acquiring a product. Value is a perception and may involve demand or additional costs that are not readily apparent (such as labor, experience, or skill; or, for paying customers, the amount of money or time involved in switching over to another product).

Historically, prices for most products were usually established through barter or negotiation. Prices therefore varied depending on the buyer’s skills. In the early part of the last century, however, some business changed this practice by adopting a strictly one-price rule in all his stores – a policy that soon spread.

Facts about Pricing

• Price is the only component of the marketing mix that produces revenue. All others represent costs.
• Price is the most flexible element of the marketing mix. Unlike the other marketing mix elements, a price can be changed quickly.
• Pricing is often the most significant factor affecting buyer choice, but it’s a double-edged sword. If a price is too high, buyers may turn away. If it’s too low, they may sense something is wrong and also turn away.
• Pricing is not often handled well. For example, if a price is cut by 10%, it may result in 50% of profits being lost.

Common Mistakes in Pricing

• Prices that are too cost-oriented (e.g.: customer value is not contemplated).
• Prices that do not reflect the current market (as above, there could be high demand or a lack of demand).
• Not taking into account the other marketing mix components (again, the perception customers have of value may not be contemplated – or perhaps it’s misjudged).
• Not varying prices according to different products, different market segments, or promotions.
• Slashing prices in the assumption that doing so will raise sales (the problem could be ineffective marketing, low perceived quality, or any number of other factors which will not be solved by changing prices).
• Raising prices to increase revenues (again, the problem may lie somewhere else – and if it does, it won’t be solved by raising prices).

Starting the Pricing Process

Before the pricing process begins, it’s necessary to consider what it is you want pricing to do for your business. The obvious answer is generating revenue, but how will this be achieved? By being more competitive? By attracting a specific clientele? By getting more customers to try a product? How about a combination of one or more of these objectives? If your business is serious about making the most of its prices, then it’s worth the time and effort to think about these questions, write them down, discuss them with colleagues, and think them over. The results can be used as a rough draft or a template for helping to set a good price.

Internal and External Factors that Affect Pricing

Consider the following when establishing a price for a product or service:

1. Internal Factors (situations or determinants inside the company). These include:

• Marketing Objectives, which are determined by the chosen target market and its position in the overall market. Knowing what targeted customers expect in terms of price can help determine a numerical value. For example:

• Is the luxury market being sought?
  • Is the economy market being sought?
  • Is a survival strategy envisioned (selling below cost)?
  • Will product prices be based on demand?
  • Do research and development costs need to be covered?

• The Marketing Mix Strategy coordinates a product along with its production, distribution, and promotion to form a consistent and effective marketing program. Examples include:

• Target Costing – Starts with the price the business wants to charge for a product, then works backwards (changing production processes, simplifying systems, working with outside suppliers and distributors, and deciding on a marketing campaign based on what the price of the product should be). Many small business operators do this when chasing clients. First they determine what the costs have to be to achieve the target price (based on customer demand), then they change their internal systems to meet the costs that will get them there.
  • Value Pricing is when the best strategy is not to charge the lowest price, but to make the product different (or seem to be different) so that it’s worth a higher price.

Costs are what the product actually costs to produce (and market), which must be covered in the price. Examples include:

• Cost-Plus Pricing occurs when a standard mark-up is added after determining the fixed and variable costs of a product. This type of pricing is sometimes seen in construction companies or with lawyers, accountants and other professionals who figure their costs then add a 20-percent mark-up (or whatever percentage is deemed appropriate).

2. External Factors are situations or determinants outside the company.

• The Market and Demand. For example:
• Pure competition – basing prices on ‘the going price’ (everybody else is doing it so we will as well)
  • Oligopolistic competition – having few sellers that are highly sensitive to each other’s pricing strategies (i.e.: if one company changes its prices so will the others)
  • Monopoly pricing – by being a sole supplier, the producer can price as he or she sees fit

• Consumer Perceptions or basing prices on what customers think constitutes value (Note: This requires a firm understanding of consumer behavior).
• Price-Demand Relationship involves setting prices according to market demand. The higher the demand, the higher the price. The lower the demand the lower the price.
• Competitor’s Costs, Prices, and Offers include basing prices on the overall selling environment.

Summing Up Pricing

When setting prices, don’t sell your business short. According to seasoned practitioners, most businesses should think about how high they can reasonably go with their prices rather than how low while always considering what customers will perceive as fair and ethical. The most common mistake entrepreneurs (particularly service providers) make when it comes to setting prices is not charging for accumulated knowledge, time, and experience.

Advice from the Pros

1. Price your products correctly the first time. It might be difficult to raise them later.
2. Factor your time and skills into your prices. Don’t undercharge for your time and expertise.
3. Always remain aware of your competitor’s prices, sales, and promotions.
4. Try to keep your prices (and therefore your profits) as high as possible by offering additional or unique services your competitors can’t, don’t, or won’t provide.
5. Remain vigilant when it comes to the prices you pay for supplies, materials, and merchandise.
6. Don’t be tempted to buy cheap. As the saying goes, those that buy cheap, usually buy twice.

Conducting Business Research

Sometime after the collapse of the Berlin Wall in late 1989, numerous Polish intellectuals, who had previously been living and working outside Poland, journeyed back to their native country to capitalize on the demise of communism as well as a baby boom that had resulted 20-years earlier due to a strict curfew imposed by communist authorities (as reported in The Economist, Polish workers took to their beds during this period because there was little else for them to do).

In less than two years, over 350 private higher education institutes sprang up like mushrooms after a spring rain. But by 2009, higher education enrollments peaked; and by 2020 the number of 19-year olds in Poland is predicted to fall to 361,500 – which is half the size it was in 2002.

Many universities, both in state and private sectors, are now under threat because there are simply not enough students to fill available classrooms. The result is that departments and faculties are feeling the pinch and financial cutbacks are taking their toll. International students are being targeted more than ever before with tuition and accommodation costs that are lower than those in their respective countries. And admission standards are reportedly lower than ever. ‘Some colleagues say that the average student in the 1990s was much better than the current ones,’ says Benjamin Stanley, who taught at a university in Warsaw from 2011-2013. He adds that Poland now has too many university students of doubtful academic quality and that too many are graduating with degrees that cannot get them a well-paying job. This sentiment is echoed by former Polish Prime Minister Donald Tusk, who publically put this situation into perspective for young adults by remarking that it’s better to be a well-paid welder than an unemployed social science graduate.  

What does all this mean for the entrepreneur? No matter how good a business opportunity is, and

No matter how good a business opportunity is, and no matter how successful a business becomes, the need for gathering, updating, and interpreting information for the purpose of benefiting from constantly changing markets and then acting upon this information - never ends.

Conducting External Research

The moment a business starts trading it cannot stand still. Economic environments and demographics are constantly changing, which means that an astute entrepreneur should not only be aware of what is going on inside his or her business, but also the dynamics that are in play outside it. And that’s because the external environment of a business (which the business often cannot control) does affect the internal environment (the systems and procedures that operate inside the business).

Vigilance and action is therefore required to ensure that a complimentary match exists between the two. Let’s start with the external environment. The following steps are designed to help explore the external environment in which an entrepreneur conducts business:

Step #1. Define what you have and what you wish to do.

This includes identifying current resources, short-term goals, and long-term goals. Remember to commit everything to writing. The honing of goals and the defining and clarifying of thoughts and solutions always improves during the process of writing.

Step #2. Evaluate your idea (or product) and the industry to which it belongs.

Gather as many opinions as possible. Understanding how customers interpret an idea or product is always more significant than the entrepreneur’s interpretation. Among the many questions to ask when conducting external research are:

• What is the history of the industry in which the business idea is located (both in general and locally)? Is it on the rise? Is it declining? Why?
• What are the benefits of the product or service?
• What are the product’s uses?
• Is there a real need for the product? How long will that need last?
• Can the proposed product be measured against an existing product? How?
• Can the product be adapted for other more profitable uses? How?
• Will the business have the ability to provide what is wanted, when it’s wanted, and how it’s wanted?
• Does the product require a previously unforeseen special license, insurance requirement, distribution system, or other expense?

Step#3. Know your customers

• Who will use the product? (Be specific. No product can be sold to everyone. A good customer profile takes into consideration: sex, age, ethnicity, religion, income level, education level, stage-of-life [i.e.: singles, students, parents, retirees], transportation needs, etc. Contact a local census bureau for details. In the USA, this information can be accessed at www.terforum.org).
• Where are the most ideal customers located?
• Why will customers use the product?
• How will they use it?
• What benefits will they derive from the product?
• How much of the product will they use? Can the product be sold in the right amounts?
• Can prospective customers afford the product – and afford to keep using it?

Step #4. Demographics.

• Is the population of the targeted customer base on the rise or is it decreasing?
• What is the current (and projected) economic situation of the area?
• What are the local purchasing trends?

Step #5. Research the competition.

• Is there a business that currently provides a similar product?
• Can another business produce the product cheaper or better?
• Will local stores carry the product?

Step #6 (For existing businesses)

• What do our customers think of our current business, products, and service?
• Are our marketing programs working? Why or why not?
• How many customers do we know on a first name basis? Have we asked their opinion?
• Are we using purchase and credit records to build customer profiles and data bases? Can we use this information to determine what our current customers might want to buy in the future?
• Do we offer incentives for return visits? If not, why not - and what can we do about it?

Step #7 Analyze your research

• Do the demographics support a sustainable market?
• Does the information gathered from steps 1-5 fit into the demand needed to sustain sales?
• Do any changes need to be made to my idea or product?
• Will providing/producing the product require more capital (or time) than was originally thought?

Making Adjustments

Don’t ignore research results if they don’t reveal what is expected. Almost every business idea either needs a bit of tweaking or an outright alternative somewhere along the way. ‘Negative results should be seen as an opportunity, not a threat,’ says the owner of Arpi Holding in Oslo, Norway. For example, if the entrepreneur needs more money than was originally envisioned, perhaps he or she can sell the original idea to an existing company. Or maybe the business will have to start small and stay small for a longer period of time than previously thought (there’s nothing wrong with that). Perhaps an office or shop can be rented or leased instead of purchased – or maybe working from home is a better option (if licensing laws permit it). If research shows that customers don’t want to go out and buy a proposed product, might they consider having it delivered instead? For example, if a restaurant is envisioned but no one seems interested, would customers take to a specialized service (e.g.: meal deliveries, catering, wholesaling, take-aways, cooking lessons, etc)? The point is to investigate all the alternatives and stay open-minded. Determining whether an idea should be doggedly pursued, modified, or abandoned, is one of the most difficult decisions an entrepreneur has to make.

Conducting Internal Research

Assessing a business’s internal environment requires honesty and openness and should not rely solely on the judgment of one person. Whether a business is in the design stages or has been up and running for years, regular internal evaluations should address the following:

• Skills. How well can (or will) the business and its people do what is supposed to be done?
• Systems. How efficiently does the business serve its customers?
• Structure. Does the set-up of the business promote peak performance?
• Values. What are the priorities of the business?
• What are the strengths and weaknesses of the person or people behind the business?
• What are (or will be) the overhead costs?

Researching the Cost of Overheads

Expenses associated with the everyday running of a commercial enterprise are called overheads.

Generally speaking, overheads must be paid whether or not a product is made or sold. Overheads are therefore an important factor in determining long-term costs. Examples of overheads include:

• Raw material costs
• Equipment and supply costs (including raw materials and office supplies)
• Insurance premiums
• Telephone bills, printing costs, leasing or hiring fees, travel expenses, repairs, etc.
• Legal fees
• Rent and utility expenses
• Advertising and marketing costs
• Shipping and storage fees (the monthly costs of transporting and warehousing)
• Wages and salaries
• Accounting fees

Many of the successful business operators interviewed for this book said that they always eye their overheads with a desire to reduce them (e.g.: switching to lower-cost suppliers, finding cheaper premises, reducing packaging needs, etc.). Put another way, endlessly exploring new ways to conduct business operations helps ensure that expenses are kept low, less waste occurs, and greater efficiency becomes standard.

SWOT Analysis

Much of the information from external and internal research can be graphically represented by what is called a SWOT analysis (SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats). The purpose of a SWOT analysis is to depict internal and external environments in an easy-to-read format. When a clear picture of the opportunities and challenges faced by a business are laid out, it becomes easier to identify, add to, and investigate areas that need to be addressed.

Note that the more honest and thorough an entrepreneur is with his or her SWOT assessment, the better the chances are of tackling the challenges involved with starting up a business. Note also that most businesses will have many more critical factors listed (i.e.: factors that are crucial to business success and can be measured against competitors) than the few depicted in the diagram.

Advice from the Pros

• When starting a business, don’t remain focused on the internal happenings of the little kingdom you plan on running. You must also stay on top of external trends (demographic changes, competitor, marketing schemes, and so on).
• Learn to handle negativity. The point of research is to locate problems and openly discuss them not shy away from them or deny they exist.
• Be open to advice and feedback. Listen and act upon what others say.
• In the never-ending battle to keep expenses down, focus on eliminating waste and improving efficiency rather than simply cutting costs. All too often, constantly cutting costs results in a reduction of quality that can turn off potential customers

Although the statistics show that inflation has decreased, but why still the cost of living and the prices of important things such as food, transport, health and communication have been seen to rise higher?

Currently, the cost of living and operational general has increased by 4.9% inflation rates 2022 compared to last year 2021 when it was 4.0% but also last month was 4.8% which is an increase of 0.1% and as an increase of 0.8% from last year 2021.

Basic needs like foods and non-alcoholic beverages, the prices have increased by 9.1% 2022 compared to last month where it was 8.3% and 3.9% for last year 2021. We expect a further increase in the price of foods and non-alcoholic beverages because we are entering the season of Christmas and New Year and the demands of these products expected to increase more.

Products like alcoholic beverages and tobacco prices have dropped by 0.9% 2022 compared to last month where it was 1% and 2.5% for last year 2021. The same goes for products like clothing and footwear costs have dropped by 2.5% this month from 2.6% last month and 4.9% last year. Housing, water, electricity, gas and other fuels, furnishings, household equipment and routine costs have increased by 3.7% 2022 compared to last month. Fuels, electricity, water and gas are the important products that have multiplier effects to all people because everyone will need water and everyone will need electricity, therefore the increase price of these products have very big impact on the individuals economy, family levels up to the national level.

The use of consultants by small enterprises is now an established trend in business. As activities relating to the conduct of business become more complex, the need for outside assistance usually increases. Managers of small- scale enterprises who want to remain competitive need to consider using consultants as they would use other support services, such as bankers, lawyers, accountants and trade associations.

Consultants can play an important role in economic development by assisting people to set up small enterprises. For new entrepreneurs, the start-up phase is the most difficult; consequently, more and more consultants focus on this important aspect of enterprise development. Consultants and small-business development centres often arrange training for entrepreneurs who intend to initiate new enterprises.

Existing small enterprises use consultants mainly to solve specific operational problems. The duration of the consultancy will depend on the specific problem but most consultancies can be accomplished within a few months. Longer consultancies may be required if the problem concerns expanding business operations. Expansion takes time and the consultant may be involved periodically for one or two years.

Managing in the knowledge economy

The competitive position of economies in particular of the highly industrialized countries – is already or will be determined by their capacity to create value through knowledge. This structural change is reflected in theories of endogenous growth, which stress that development of know-how and technological change are the driving forces behind lasting growth. Knowledge is increasingly recognized as the principal source of value generation .  The most recent economic growth comes not just from general advances in knowledge and the state of technology, but also from intangible financial products, entertainment, and computer software. Quah calls this “the weightless economy”, which he defines as not just more and better technology, but a reduction of distance between knowledge production and consumers, removing the intermediaries of traditional intellectual property protection and manufacturing. With fast interactions across countries, international learning processes become faster, and new competitors enter traditional businesses. The newest technologies – computers, the Internet also allow consumers to get closer to knowledge production. The traditional trade- off between reach and richness of interactions between producer and consumer seems to be no longer valid. The newest technologies produce new weightless goods – software, video entertainment, and health and financial consulting services – that can be considered as if they were knowledge. Little sits in the chain between knowledge production and final consumption. As information and communication technologies are the main drivers of this new economy, authors talk about the digital or information economy.

Currently, Tanzania inflation has reached 4.8% compared to last month where it was 4.6%, within a one year inflation rates has increased by more than 0.8% from 4.0% for 2021.

Foods and Non-alcohol products have contributed to rapid increase in inflation rates, which currently inflation rates hit 8.3% compared to last year's by 4%, with an increase rates of 4.3% (51%).

The demand for food has become higher due to the rapid increase in the number of people in urban areas, most of our urban areas do not produce food, dependence on rural areas where by agriculture productions takes place, which increase the demand for alcohol and non-alcoholic drinks.

Transportation costs have increased by 7.9% compared to last month where it has decreased by 0.2%, compared to last year the costs have increased by 2% from 5.9%. The increase in inflation rate on transport was due to the increase in the price of fuel but currently the situation is stable.